Dairy prices rise at first Global Dairy Trade sale for 2020

Dairy prices lifted by 2.8 per cent at the first Global Dairy Trade auction for 2020, partly offsetting a sharp fall at the last auction.

All the products on offer this morning recorded gains, led mostly by the milk fats.

At the last auction for 2019, prices declined by 5.1 per cent after strengthening throughout most of the second half.

Among the key products on sale this morning, whole milk powder prices - which have the greatest bearing on Fonterra's farmgate milk price - rose by 1.7 per cent to US$3150 a tonne.

Among the other reference products, skim milk powder prices (SKM) rose by 5.4 per cent to US$3026 a tonne.

Butter prices rose by 3.7 per cent to US$4029/tonne and butter milk powder lifted by 7.4 per cent US$3040 a tonne.

Anhydrous milk fat prices gained by 2.3 per cent to US$4929 a tonne.

Among the non-reference products, cheddar prices rose by 3.7 per cent to US$4015/tonne.

Rennet casein prices lifted by 8.6 per cent to US$8973/tonne.

ASB Bank said the gain in SKM and broader global dairy price strength was consistent with ongoing tight global dairy supply.

"With respect to SMP prices, the recent hot run owes to the absence of global stockpiles, which previously had been keeping a lid on prices," it said.

ASB noted the market had rebounded from the preceding weak previous auction.

"We had put the previous price weakness down to a surprise lift in planned auction volumes by Fonterra, signalling a greater proportion of dairy product would be channelled through the auction platform," ASB said.

"The price rise at this auction confirms that a knee-jerk reaction to the volume announcement was the driver of the recent price fall rather than any fundamental change in global dairy market dynamics," it said.

ASB has predicted a $7.50/kg milk price for 2019/20.

Fonterra last year upgraded its farmgate milk price forecast to $7-$7.60 per kg, which would be the fourth highest milk price in its two-decade long history if it comes to pass.